Commonwealth v. Allied Building Credits, Inc.

• Decision Date: 25 June 1956
• Docket Number: 4106
• Citation: 123 A.2d 686,385 Pa. 370
• Parties: COMMONWEALTH of Pennsylvania, Appellant, v. ALLIED BUILDING CREDITS. Inc., Appellee.
• Court: Pennsylvania Supreme Court

123 A.2d 686

385 Pa. 370

COMMONWEALTH of Pennsylvania, Appellant, v. ALLIED BUILDING CREDITS. Inc., Appellee.

No. 4106

Supreme Court of Pennsylvania

June 25, 1956

Argued May 21, 1956

Appeal, No. 2, May T., 1956, from decree of Court of Common Pleas of Dauphin County, Commonwealth Docket 1952, No. 132 in case of Commonwealth of Pennsylvania v. Allied Building Credits, Inc. Decree affirmed.

Appeal by taxpayer from decision of Board of Finance and Revenue refusing petition for resettlement of corporate net income taxes.

Order entered directing credit for taxpayer and sustaining appeal exceptions to order dismissed and judgment entered, opinion by KREIDER, J. Commonwealth appealed.

Decree affirmed at the cost of appellant.

Stephen B. Narin, Deputy Attorney General, with him George W. Keitel Ralph S. Snyder and Edward Friedman, Deputy Attorneys General, and Herbert B. Cohen, Attorney General, for appellant.

John Y. Scott, with him Philips, Farran & McKeag, for appellee.

Before STERN, C.J., JONES, BELL, CHIDSEY, MUSMANNO and ARNOLD, JJ.

OPINION

MR. JUSTICE CHIDSEY

The Commonwealth appeals from the final decree of the Dauphin County Court declaring invalid and setting aside a settlement and resettlement of the appellee's corporate net income tax for the fiscal year ended November 30, 1943. The court's action was based on the failure of the tax officers to comply with Section 8 (a) of the Corporate Net Income Tax Act, the Act of April 8, 1937, P.L. 227, 72 PS § 3420h. (a) which reads: "(a) All taxes due under this act shall be settled by the department, and such settlement shall be subject to audit and approval by the Department of the Auditor General and shall, so far as possible, be made so that notice thereof may reach the taxpayer before the end of a year after the tax report was required to be made.".

The case was heard without a jury. By agreement of counsel all of the material and relevant facts were submitted to the court in a written stipulation from which it appeared: On March 7, 1944 appellee filed its corporate net income tax report for 1943 upon which it computed and paid a tax thereon in the amount of $100.70; on March 13, 1946 appellee filed a report of change and paid an additional tax of $4.65 as a result of changes made in its net income by the Federal Government; notice of settlement was mailed to appellee on August 2, 1951 [more than 7 years after the filing of the taxpayer's report] when it was informed that on July 5, 1951 the Department of Revenue had settled and on July 18, 1951 the Auditor General had approved an account for the tax in the amount of $770.55; on January 2, 1952 the Departments of Revenue and of the Auditor General refused appellee's petition for a resettlement; on January 21, 1952 the Department of Revenue made a resettlement increasing the amount of the tax to $840.83 as a result of the report of change. This resettlement was approved by the Auditor General on January 23, 1952. On May 15, 1952 the Board of Finance and Revenue refused appellee's petition to review, and on July 7, 1952 appellee paid the balance of the $840.83 found due under the resettlement. In addition to the foregoing it was also expressly stipulated that there was no evidence for the court's consideration that it was not possible for the Department of Revenue to settle and for the Auditor General to audit and approve such settlement so that notice thereof would reach appellee before the end of a year after the tax report was required to be made. ^[1]

Appellee appealed to the Dauphin County Court which after hearing and argument, filed an opinion and order directing judgment to be entered in favor of the Commonwealth "... in the amount of $105.35, which judgment having been overpaid shall be marked satisfied; and, further, a credit of $735.48 is hereby directed to be entered in favor of the ... Allied Building Credits, Inc., on the proper books and records of the Department of Revenue and the Department of the Auditor General, unless exceptions are filed within the time limited by law. ...". Exceptions were filed by the Commonwealth which were dismissed by the court en banc which filed an opinion and decree affirming the order theretofore entered. This appeal followed.

The decree is affirmed on the following excerpts from the opinions of the learned court below: "The object of all interpretation and construction of laws is to ascertain and effectuate the intention of the Legislature. To give effect to that intention, after first ascertaining what it is, is the task given to the courts. Act of May 28, 1937, P.L. 1019, sec. 51 (46 P.S. 551); Kearcher v. Mt. Oliver Borough Council, 363 Pa. 148, 151 (1949); Panik v. Didra, 370 Pa. 488, 493 (1952). For the purpose of ascertaining legislative intent the Statutory Construction Act of May 28, 1937, P.L. 1019, Sec. 52 (46 P.S. 552) provides in part: 'In ascertaining the intention of the Legislature in the enactment of a law, the courts may be guided by the following presumptions among others: (1) That the Legislature does not intend a result that is absurd, impossible of execution or unreasonable; (2) That the Legislature intends the entire statute to be effective and certain;' Section 8(a) of the Corporate Net Income Tax Law, Act of April 8, 1937, P.L. 227, as amended (72 P.S. 3420h et seq.), provides, 'so far as possible', a one (1) year limitation after the date on which the tax report must be filed within which notice of the settlement of the tax shall be given to the taxpayer. Section 8(c) provides that a resettlement of the taxpayer's account may be made within two (2) years after a settlement has been made, and thereafter only under certain enumerated conditions not here applicable. Section 10 provides that each corporate taxpayer must keep its records for a period of three (3) years after any report is filed under the statute, and, further, penalties are provided for non-compliance with this section. Reading these provisions in their entirety the statute provides (a) a certain act (settlement) to be carried out with(in) a one year period, (b) another act (resettlement) to be accomplished within a two year period immediately following the act done within the one year period and (c) a three year period is prescribed during which taxpayers must retain their business records relating to corporate net income tax under penalty of law. We feel that the time limitations, as set forth in the statute, are strong evidence of the intention of the Legislature when the statute was enacted. Should the time within which a settlement or a resettlement might be validly effected be left to the uncontrolled discretion of state officials, Section 10, relating to the three year period for retaining business records, would be rendered useless as a practical matter. Section 10 was inserted in the statute to aid the Department of Revenue and to promote and preserve efficiency in the computation and recomputation of the tax. When Section 10 is read in conjunction with the preceding sections 8(a) and 8(c), relating to settlement and resettlement, its further purpose appears to be to protect the taxpayer and relieve him of the unnecessary expense and effort of maintaining business records over a long period of years. To hold that the Legislature intended that the one year limitation set forth in Section 8(a) can be wilfully ignored would not only be contrary to the clear and express language of the statute, but would also lead to unreasonable results and, as state, would not be giving effect to the entire statute. Furthermore, under Section 8(a) the notification required to be sent to the corporate taxpayer concerns the settlement of its tax, the original amount of which is self-computed by the taxpayer. The Department of Revenue may either accept, decrease, or increase the amount of the tax, as its computations determine, when making the settlement. The taxpayer, until he is notified, does not know what action has been taken. Whether accepted, decreased, or increased, the tax is imposed and assessable against the taxpayer by the proper state authorities when the settlement is effected. The one year limitation in Section 8(a) also must be given effect because Section 58 of the Statutory Construction Act, supra, (46 P.S. 558) provides: "All provisions of a law of the classes hereafter enumerated shall be strictly construed: (3) Provisions imposing taxes;'

"Appellee [appellant in this Court] contends that Section 8(a) does not 'impose' the tax, and, therefore, it does not have to be strictly construed. Whether or not the specific section of the law involved 'imposes' the tax need not be decided in view of the rule set forth by the Supreme and Superior Courts of Pennsylvania in a great number of cases. In Scranton v. O'Malley Mfg. Co., 341 Pa. 200, 204, 205 (1941) it is stated: '... Liability to pay taxes arises from no contractual relation between the taxable and the state and cannot be enforced by common law proceedings unless a statute so provides. They can be collected in no other way than that provided by the statute: Schmuck v. Hartman, man, 222 Pa. 190, 195, 70 A. 1091; Leopold Tax Assessment Case, 118 Pa.Super. 158, 163, 179 A. 904. Tax statutes should receive a strict construction: Boyd v. Hood, 57 Pa. 98. In cases of doubt the construction should be against the government: Gould v. Gould, 245 U.S. 151, 153, 38 S.Ct. 53; U.S. v. Merriam, 263 U.S. 179, 188, 44 S.Ct. 69; Com. v. P.R.T. Co., 287 Pa. 190, 196, 134 A. 455. While it is the duty of every citizen to bear his just share in supporting the government, he cannot be compelled to do so except in a way provided by a statute. This gives rise to a rule in tax law, of general application, that whatever the law requires to...